Bandwidth and Echo: Trust, Information, and Gossip in Social Networks

Abstract

There are two schools of thought on how network structures create the competitive advantage known as social capital. One school focuses on the advantages of closure. A network is closed to the extent that people in it are connected by strong relationships. Typical forms of closure are dense networks in which everyone is connected to everyone else, and hierarchical networks in which people are connected indirectly through mutual relations with a few leaders at the center of the network. Both forms provide numerous communication channels, which facilitates the enforcement of sanctions against misbehavior. Closure lowers the risk of trust, and so facilitates collaborative efforts that require trust. A second school of thought focuses on the advantages of brokerage. Markets and organizations are assumed to be a network of interdependent groups in which information flows at higher velocity within than between groups such that separate groups come to know about different things. Boundaries between groups define holes in social structure, “structural holes,”